Robert Pera's bid to buy Memphis Grizzlies could include 33 percent local ownership

Suitor ponders partners, commitment

In early May Grizzlies fan Jonas Malady showed concern as he awaited the start of Game 2 against the Clippers at the FedExForum. If the playoffs weren't worrying enough, now Grizzlies fans have an entirely new concern as Pera's commitment to Memphis is questioned.

As much as one-third of the Grizzlies could be owned by local partners as part of prospective owner Robert Pera's bid to buy the team, sources close to Pera told The Commercial Appeal.

Pera's associates insist that the 34-year-old CEO of Ubiquiti Networks isn't pushing for local partners because he needs to, but because he wants to collaborate with Memphians for the franchise's overall good. In addition to local partners, the group also could include out-of-town partners, said the sources, who requested anonymity because they have not been authorized to speak on Pera's behalf. Also, the NBA discourages public comments by prospective owners and their representatives during the approval process.

Pera's representatives have been in Memphis in recent weeks, meeting with dozens of business and community leaders in what has been termed a "listening tour." As part of the visits, Pera's team has had conversations with prospective minority partners. In those conversations, the sources said, prospective owners have voiced two main concerns: 1) the degree of Pera's commitment to Memphis, 2) the fear of dilution of their ownership share over time.

It's unclear who is being courted as potential local partners. The current group includes J.R. "Pitt" Hyde — the AutoZone founder with whom Pera had dinner last month, according to the latter's blog — along with Barbara Hyde, Staley Cates, Andy Cates, Fred Jones and Elliot Perry. Sources told the newspaper late last month that Pera flew to Colorado to meet with Hyde, and that he'd been in Memphis for a visit that included a get-acquainted session with FedEx CEO Fred Smith and other FedEx leaders.

Attempts to reach the current local group were unsuccessful Tuesday.

Though the sources would not say what may be on the negotiating table to assuage the concerns of prospective local partners, logic would suggest at least a couple of items, as it pertains to Pera's commitment to Memphis:

A right of first refusal for the local partners to buy the team if Pera decides to sell or leave Memphis. That was part of the original contract between locals and owner Michael Heisley, though it was dropped a few years ago when the local partners did not kick in additional capital. The city and county maintain their rights of first refusal, though, in the team's lease to occupy and run FedExForum.

A lengthened lease or increased financial penalty for departure will be a consequence, even though the team is in no imminent danger of doing so. The lease itself is stringent: It runs through 2029 and does not offer an exit until 2021 if certain attendance goals are not met.

The 33 percent share would be significantly more than what the current local partners hold — some 2 percent — and more in line with their original holding. Though the original idea under Heisley's majority ownership was for locals to own 49 percent of the team, it was eventually formalized as 30 percent.

The locals saw their share diluted over the years after they did not answer Heisley's calls for more capital to fund the team's operations, thereby making the potential of their stakes in the team less lucrative.

The sources stress Pera is committed to Memphis long term and wants to be a part of the community should his purchase be approved by the NBA.

Among ideas for community involvement Pera has kicked around: an arrangement whereby University of Memphis students have a pipeline to intern at Ubiquiti.

Pera, who lives in San Jose and Taiwan, agreed on June 11 to buy the Grizzlies. His deal is being vetted by the NBA and must be approved by the league's board of governors, comprised of all 30 team majority owners.